Hedging Currency Risk Strategies for Corporations

XYZ Corporation, a U.S.-based company, operates in Europe and imports goods priced in euros. Due to the potential volatility of the euro against the U.S. dollar, XYZ is considering financial instruments to hedge its currency risk. The firm's CFO expects that the euro will weaken against the dollar over the next year, thus affecting profit margins directly.

In analyzing their options, the CFO wants to know which strategy would effectively mitigate the risk of a stronger dollar during the period when payments are due in euros.